Triangle Area Distress Real Estate

Purchasing Foreclosure Property

As REO Realtors, we have access to thousands of bank-owned properties as well as properties for sale that are considered "pre-foreclosures" or "short sales". This occurs when the lender agrees to accept less than the total owed on the property in exchange for releasing the mortgage as a lien on the property.

What is a REO?

REO stands for 'real estate owned". A REO property has gone through foreclosure and is now owned by the lender, generally a bank of mortgage company. A REO property is a cleaner transaction that purchasing a property that's on the foreclosure auction block held on the courthouse steps. When buying a foreclosure property at auction, the buyer pays the loan balance plus any interest or other fees the lender incurred during the foreclosure process. And the buyer must pay with cash in hand and without the benefit of an inspection. There also may be liens against the property (mechanics, tax) and the homeowners may still need to be evicted.

A REO property did not find a buyer during the foreclosure auction and the lender now owns it. The lender then will remove liens, evict occupants, and generally pay for title insurance, However, REO sales usually are "as is." It is up to the buyer to do his or her due diligence and obtain a home inspection and any other inspections deemed necessary, such as geologic, mold, structural, and anything else along these lines.

Are REOs a Bargain?

Sometimes. It's generally believed that buying a REO property can be easy money, a bargain. This is not always the case. A buyer needs to investigate the property thoroughly. The lender is anxious to sell, to get this non-performing asset off its books for as much money as it can. However, to determine if the property is a good buy, you need to know the comparable sales in the neighborhood. Take into account the time and money needed for any repairs needed to prepare the home for resale. If you intend to rent the property, know what rents are going for in the neighborhood and whether your cash flow will be sufficient. If you are considering buying a REO property for your personal home, make sure your inspection contingency period in your Residential Purchase Agreement is sufficient to allow for a home inspection and any follow up inspections. If any major problems emerge, you need to be able to withdraw your offer before removing the inspection contingency.

Are You Ready to Buy?

The realtor who listed the property works with the lender's REO department or an asset management company to process your purchase. The listing agent puts the property into the Multiple Listing Services and oversees the maintenance on the property. Before making an offer, contact the listing agent to learn about the condition of the property and schedule an appointment to see it. The agent also can tell you about the lender's process for receiving offers. When making an offer, it is important to include a pre-qualification letter from your lender which shows you are capable of performing. After the bank has received your offer, it may issue a counter offer. It will be up to you to decide whether to accept it. It is not uncommon for this process to take weeks, sometimes a couple of months, because usually more than one person at the bank is involved and their workload at times can be heavy. But your patience can pay off.

For more information on foreclosure properties, call Margie Ax at (919) 427.3875